New Delhi: Hinting at more tightening of economy, the Reserve Bank of India on Wednesday raised repo rate by 25 bps points to 6.50 per cent.
The decision will leave its ripples in the market with EMIs for loans going up, making a large number of people worry about spending more on debt.
The decision to hike repo rate appears to be less surprising as it has happened along the predicted lines.
However, RBI has certainly surprised markets as it hints at further tightening to fight inflation, according go Reuters.
Analysts across the board were reportedly expecting a hike in repo rate despite there was upward revision by 250 bps since May last year.
Four of the six members of the monetary policy committee (MPC), which includes three members from the central bank and three external members, voted in favour of raising repo rate to 6.50 per cent, according to Reuters.
RBI Governor Shaktikanta Das expressed concern about the underlying inflation, and called for “unwavering” commitment to bring down inflation.
The new hike comes just as the economy is yet to weather the impact of the previous hike.
A poll revealed ahead of the national budget said 40 of the 52 economists expected a hike of 25 bps in repo rates.
It is reported that RBI brought down the liquidity surplus in the banking system to below 2 trillion rupees from a whopping 9-10 trillion rupees following the support measures to pandemic crisis.
While core inflation is still running at 6.1 percent, India’s annual retail inflation rate has come down to 5.72% in December from 5.88% in the previous month.
It has fallen below the RBI's upper tolerance band of 2%-6% for a second straight month.